The FTSE 100 rallied on Tuesday led by oil giant BP as the pound weakened and investors shrugged off concerns about eurozone economic growth.
London’s premier index closed 143.24 points, or 2.04%, higher at 7,177.37, while Germany’s DAX rose 1.66% and France’s CAC grew 1.54%.
David Madden, market analyst at CMC Markets, said: “The FTSE 100 hit a two-month high today. A strong performance from BP propelled the market higher, but there was also a rise in consumer, mining and financial stocks.
“Equity markets in Europe have extended their rally today despite the ongoing economic malaise in the eurozone. Equity traders have shrugged-off the so-so economic updates from the currency bloc, as they believe the European Central Bank will adjust their policy should the situation deteriorate”.
Meanwhile, the pound hit a two-week low after data showed that output in Britain’s dominant services grinded to a near-halt in January as Brexit anxiety took a toll on growth.
The closely watched IHS Markit/CIPS services purchasing managers’ index showed a reading of 50.1 in January, down from 51.2 recorded a month earlier and missing economists’ expectations of 51.
Sterling was down 0.7% against the US dollar at 1.294 – below the 1.30 mark -and declined 0.42% versus the euro at 1.134 at the London market close.
Fiona Cincotta, senior market analyst at City Index, said weak economic data was not the only factor hitting demand for the pound.
“Investors are starting to tire of Theresa May’s circles with Brexit.
“May will head to Brussels on Thursday to attempt to break the Brexit deadlock. Judging by the weakness in the pound traders are not convinced that she will get very far – a reasonable assumption in our opinion.
“Instead we are likely to see Parliament propose further amendments next week”.
In corporate news, BP profits more than doubled, prompting a 26.9p rise in the share price to 547p. The FTSE 100 stalwart has been riding the wave of a rebound in the cost of crude in recent years, as has rival Royal Dutch Shell, which last week reported a 36% jump in annual profits.
Ocado investors were unfazed by the news that the online grocer’s losses had widened and news that customer orders from its new Andover warehouse have been suspended following a fire.
The firm’s losses grew to £44.4 million in the year to December 2, compared to an £8.3 million loss the previous year.
Ocado shares closed up 41.4p to 1,034p.
Troubled Carpetright dropped by 1.3p to 20p as it said UK sales remain under pressure and announced the departure of its finance head. Neil Page will step down later this month to retire from a full-time role.
Brent crude, the international benchmark, traded down 0.84% at 62.28 US dollars (£48.11).
The biggest risers on the FTSE 100 were BP up 26.9p to 547p, Smurfitt Kappa up 110p to 2,270p, Ocado up 41.4p to 1,034p, and Burberry up 70p to 1,878p.
The biggest fallers on the FTSE 100 were Segro down 5.8p to 641.2p, Associated British Foods down 13p to 2,409p, Fresnillo down 4.6p to 966.6p, and Barratt Developments down 1.2p to 546.4p.
Norwegian energy giant Equinor has announced the assembly site for its second floating wind project.
The Hywind Tampen project will produce enough electricity to power a number of North Sea oil and gas platforms.
The eleven floating wind turbines will be constructed at Gulen Industrial Harbour in Sogn og Fjordane.
Reduction of CO2 emissions from five oil and gas platforms at the Snorre and Gullfaks fields is estimated at more than 200,000 tonnes per year.
Equinor’s project director, Olav-Bernt Haga, said: “Equinor on behalf of the partners, have awarded a contract to Wergeland Base in Gulen Industrial Harbour in Sogn og Fjordane based on assessments of i.a. topographic suitability, safety as well as technical and commercial conditions.”
He added that with a combined capacity of 88 megawatts (MW), the 8 MW turbines “will meet around 35 % of the annual power demand of the five platforms”.
Hywind Tampen follows on from the Hywind Scotland project, which has outstripped expectation and beat the industry average for energy availability for four out of its first six months of operation.
Hywind, the first floating offshore wind farm of its kind, has been producing power for more than a year.
The five-turbine development is 16 miles off the coast of Peterhead, Aberdeenshire, and can power around 20,000 homes.
In July, Peterhead was the chosen site of a world first as the Hywind floating wind farm was hooked up to a battery storage system capable of receiving grid connection.
Offshore accommodation provider Prosafe narrowed its losses in 2018 as utilisation picked up.
The company is shedding about 150 workers, most of whom are understood to be British, in an effort to make the firm more “sustainable and competitive”.
Fleet use was still low, at 47.3%, but was an improvement on the 38.4% managed in 2017.
The fourth-quarter utilisation rate of 63% was Prosafe’s highest quarterly result since Q3 2015.
The Cyprus-headquartered firm suffered pre-tax losses of £83 million in 2018, compared to a deficit of £490m a year earlier.
Revenues increased to £250m from £217m.
Safe Boreas continued the contract with Equinor at the Mariner installation in the UK and was in full operation throughout the quarter. The contract has a firm period through June 2019 with additional six one-month options.
Safe Caledonia completed its operations for BP at the Clair Ridge platform in the UK in November and is now laid-up at Scapa Flow in the UK.
It is scheduled to commence work for a major oil and gas operator in the UK sector from mid-April 2019 with a firm duration of four months and up to two months of options.
In October, Safe Zephyrus was awarded a contract by BP to provide gangway connected operations at Clair Ridge.
And in December, Regalia was chartered for a 60-day contract in the UK sector of the North Sea commencing June 2019 with 30 days of options.
Regalia will be reactivated to perform gangway connected DP operations. The reactivation period will commence within Q1 2019 and include her five yearly special periodic survey in line with classification society requirements.
Prosafe said it was encouraged by the award of contracts related to maintenance and modification projects which have traditionally been the “key demand driver” for accommodation rigs.
Prosafe chief executive Jesper Andresen said: “We had a busy quarter with the highest quarterly utilisation since Q3 2015. This, combined with the two recent contract awards which are both related to maintenance and modification work in the UK sector, are positive developments.
“In addition, we came first in an auction in Brazil in January 2019 which may allow us to take a newbuild on the water during this year. In sum this gives raise to continued optimism.”
Operational reliability was “very strong” at BP last year, with group production averaging 3.7 million barrels of oil equivalent a day (boed), 2.4% higher than in 2017.
Upstream production was 3% higher at 2.5m boed.
Total revenues jumped 24% to £232bn last year, while pre-tax profits rose to £12.8bn from £5.5bn, aided by higher oil prices.
Gulf of Mexico oil spill payments totalled £2.4bn.
This year’s output is expected to be higher again due to the ramp-up of new projects.
Meanwhile, BP intends to complete more than £7.6bn worth of divestments over the next two years.
In a sign of the energy transition’s increased influence over oil firms, BP acquired UK electric vehicle charging company Chargemaster and solar developer Lightsource BP expanded internationally.
BP chief executive Bob Dudley said: “We now have a powerful track record of safe and reliable performance, efficient execution and capital discipline.
“And we’re doing this while growing the business – bringing more high-quality projects online, expanding marketing in the Downstream and doing transformative deals such as BHP.
“Our strategy is clearly working and will serve the company and our shareholders well through the energy transition.”
Chief financial officer Brian Gilvary said: “Operating cash flow excluding working capital change was up 33% for the full year and 17% higher than last quarter, including a positive contribution from our new US assets.
“The continued strong cash flow growth underpins the balance sheet as we absorb the BHP acquisition and deliver more than $10 billion of divestments over the next two years.”
Stuart Joyner, energy specialist sales at equity researcher Redburn, said: “The ‘BP investment case’ was on an upward trajectory but has improved further still after buying BHP’s shale business for £8bn.
“BP’s free cash flow yield is set to inflect to its highest level on record in the early 2020s. Its targets are on track: to generate £10.7-11.5bn of pre-tax upstream free cash flow in 2021, off a baseline of £9.9-10.7bn of capex.
“Segment-by-segment breakouts implied that these targets are conservative. The 900,000 boed production ramp-up to 2021 is going to cost £11.5bn less than thought in 2015.
“And a further 40-50% free cash flow uplift is possible by 2025, at constant capital and $55 per barrel real oil.”
John Moore, senior investment manager at Brewin Dolphin, said: “Despite a volatile oil price at the tail end of last year, BP more than doubled profits in 2018 as it showed cost, capital, and operational discipline across its businesses.
“The company is aware of the changing energy landscape and is active in responding to that by going through significant internal changes, in addition to external moves such as its deal to purchase BHP Billiton’s shale gas assets.
“While small at this stage, the acquisition of electric vehicle charging company, Chargemaster, also offers a foothold in the electric car future. 2019 may well be a year of further oil price volatility and additional industry change; however, the company has shown a great deal of resilience and an ability to adapt to a rapidly changing energy landscape, which leaves it well placed.”
Scottish subsea engineering is world class, according to an extensive study of the sector.
“Respect, experience, depth, quality, confidence, assurance and efficiency were all used regularly to describe the Scottish subsea engineering industry,” said the report by consultancy Xodus, on behalf of Scottish Enterprise.
“The breadth of experience and the depth of the talent pool is seen as a key factor to the success of the region,” the report’s authors said.
Due to the age and the variety of North Sea infrastructure, Scottish engineers have tackled challenges that some other international subsea hubs are yet to experience.
“This has led to Scottish engineering being desired worldwide,” says the report.
Aberdeen hosts tier one and two contractors and myriad smaller companies offering a huge spread of capabilities. It compares very well with other major subsea centres, notably Norway, Houston, Malaysia and Rio de Janeiro.
“Scotland is very much a base from which a lot of these companies operate internationally, whether directly with clients, or via local satellite offices,” the report said.
“While many of the hardware suppliers have set up additional facilities in other regions to reduce costs and comply with local content rules, it is firmly believed that the engineering of new products and complex evolutions are driven from the Scotland offices.
“The Scottish sector is perceived as being on equal footing with Norway.
“There are areas where Norway excels, including diverless technology and subsea hardware manufacture.
“However, Scotland also has countering strengths and overall it is the depth, quality and adaptability of the Scottish engineering sector that is most often quoted as its strength and advantage over Norway.”
But when it comes to seeking business around the world, it seems that the Norwegians are better organised and they enjoy political support of a kind that is rare in
A key competitive advantage for Scotland raised by several Norwegian respondents was the openness of Scottish engineers to experiencing other regions.
This is something the Norwegians don’t have and envy.
But there are worries. While the UK has forums for sharing best practice, their effectiveness is often curtailed by commercial or legal restrictions.
Improving integrity data sharing between operators is paramount to ensuring Scotland remains at the forefront of the inspection, repair and maintenance (IRM) market.
In this regard, the development of intelligent pipelines, fibre optics and sensors is key to ensuring continued success.
For now, Scotland has the technology, infrastructure and know-how to exploit this market further, but for how much longer?
It seems that innovation remains strong in Scotland.
But while there is a strong support network for companies, “whether the landscape for support is completely understood by the industry could be questioned”.
Funding support at the early stage of the commercialisation journey is strong, with many avenues available.
But there’s a clear problem. To its disadvantage, the UK does not have a national oil company. NOCs characterise most oil nations, but not in the UK, where the emphasis is on a free market characterised by short-termism.
“Without an NOC to provide financial backing and long-term strategy, the Scottish sector is reliant on independent operators and government to support R&D and commercialisation,” the report said. “This leads to the impression that major technology is being developed by other regions.”
IRM, often involving remotely operated vehicles, is one of Scotland’s strong cards. It is bread and butter work that can deliver a decent living.
But it also faces challenges: “One of the biggest paradigm shifts in subsea pipeline IRM would be the development of long-duration autonomous underwater
AUVs remain saddled by a major problem – battery life is still measured in hours.
Work has been carried out to develop renewable-powered AUVs, but none of it has reached commercialisation.
So, might the eureka solution come out of Scotland? Oil and gas IRM can crossover to offshore renewables, another sector that wants to lower inspection costs and understand more about corrosion.
A recent study placed the possible market size for UK anti-corrosion solution vendors at £3.3 billion by the early 2020s, rising to £14.4bn
And so to decommissioning. Whichever way it is sliced and diced, the cost of North Sea dismantling is huge. It also presents technical, execution, market, socio-political and organisational risks.
The Xodus report said: “A common risk is where facilities have changed hands and collation of sufficient data of the core structures is inadequate, leading to greater uncertainty.
“Data availability and management is a key pillar to the success of any decommissioning project as it enables issues to be identified at
an early stage.
“Innovation will be paramount to ensure Scotland’s subsea engineering expertise is carried forward.”
In decommissioning, best available technology (BAT) assessments are conducted for each field, so new innovations are looked at and can break through if they are valuable.
Well plugging and abandonment (P&A) is the biggest market that can be exploited by the Scottish subsea supply chain.
P&A typically constitutes 40-50% of offshore decommissioning costs, so each company’s approach plays a significant role in lowering the bill.
Many operators have opted for P&A procedures that go far beyond the minimum regulatory requirements of the countries where they operate.
And many regions around the world are adopting standards set out by Oil and Gas UK (OGUK) rather than developing their own.
This presents a significant opportunity for the Scottish supply chain to export its expertise in emerging decommissioning markets.
Unfortunately, there is a perception that a lot of decommissioning business is not being won by Scottish and UK companies. But there is hope.
“With a significant percentage (50-75%) of decommissioning costs being borne by the UK taxpayer via tax refunds, it is likely that there will be political pressure exerted to keep these rebates within the UK/Scottish economy,” the report authors said.
While oil and gas development and operation has provided most subsea engineering experience over the last 40 years, we now have other subsea industries emerging.
Offshore wind construction in the North Sea is booming. Each of the many thousands of turbines now at work represents an IRM opportunity, including a subsea element because of cabling and foundations.
WindEurope expects a total capacity of 70GW of offshore wind energy by 2030 in its central scenario.
Most of this capacity will be in the North Sea, with almost 48GW.
Turbines are getting larger, farms are being built in deeper and more challenging locations and floating turbines are now a reality.
Wave and tidal capacity is miniscule, but Scotland is home to the European Marine Energy Centre (EMEC) in Orkney, which is widely considered the world’s leading marine renewables testing facility.
Simec Atlantis’ MeyGen project in the Pentland Firth is the world’s largest planned tidal stream project.
While the industry is in its infancy, there is a high level of interest. More than 25% of Scottish engineering firms boast capabilities in the marine renewables market.
SAC said an “ambitious sector deal” was best way of cementing the north-east’s place as a world leader in energy production.
A National Decommissioning Centre (NDC) has already been launched, while plans are being made for the transformational technology and underwater innovation bases.
At the launch event for SAC’s report, Mr Garlick said that while speed is crucial, industry can only develop so many new initiatives at a time.
“The idea of one big sector deal with all this in it feels like a stretch,” said Mr Garlick. “It might be better to advance this one project at a time.”
The former BP North Sea boss said Norway already had a global subsea centre of excellence, and that the UK should have one as well.
Mr Garlick, director of economic development body Opportunity North East, added: “Industry cannot cope with everything being urgent. We’ve got the NDC. The next one should be around subsea and underwater innovation.”
Colette Cohen Chief Executive of the Oil and Gas Technology Centre.
Ms Cohen said she was “really encouraged” by SAC’s strong focus on technology and its recommendations on partnerships between industry and government.
She said a transformational technology centre, which would be part of the OGTC, would help the oil and gas industry finds its role in the low carbon energy transition.
Ms Cohen said: “We have a massive opportunity to take this report and start the conversation. If we get this right, every country will want to follow us, because everyone is going to go through this transition.”
Committee chairman Pete Wishart MP said oil and gas was an “iconic industry for Scotland” and called for the UK Government to bring forward an oil and gas sector deal “without delay”.
Mr Wishart also said the sector deal could have been “more ambitious” around carbon capture, usage and storage (CCUS).
SAC wants industry to firm up proposals showing how the centres of excellence would support the development of CCUS technology.
Furthermore, SAC advised government, industry, environmental groups and academics to come up with a “common evidence base” around the “rigs to reefs approach to decommissioning” after encountering “genuine disagreement” on the subject.
Pete Wishart MP Chairman of the Scottish Affairs Committee.
The last two years of recovery have been tough, made all the worse by some “catastrophic” failures as the subsea industry sought to restructure and downsize to suit trading conditions.
But some smaller firms with specialist technologies in inspection, repair and maintenance have been very busy, Subsea UK chief executive Neil Gordon said.
“Things have picked up quite dramatically for them,” Mr Gordon said. “My concern now is that things could get very busy to the end of this year.
“But will there be enough people to drive things forward, bearing in mind that a lot of jobs were lost during the latest downturn?”
Mr Gordon warned that market conditions are still very tight. An oil price of $60-70 is seen as the sweet spot to enable offshore development to go ahead.
Operators are starting to spend again having benefited from the recent oil price run to $80-plus, and that is fuelling greater confidence.
Then came the rapid drop back to around $50 in the fourth quarter, followed by an uplift to around $60.
“I don’t have a crystal ball but investment is not based on day-to-day pricing of oil, but on long-term futures,” said Mr Gordon.
“The margins on projects tend to be very tight. Hopefully conditions will go on improving and further efficiency gains will be won.
“But this can’t just be about driving down costs. It has to be about being smarter, more efficient and innovative.”
But how well placed is the subsea sector to play its part, considering the beating it has taken since 2014?
Has the emergence of offshore wind helped?
“For some time, we have been encouraging subsea firms to become more diverse,” Mr Gordon said. “That’s key. The offshore industry has experienced several downturns but the one just past was probably the biggest and harshest of all.”
But while there have been and remain various initiatives to help the recovery, Mr Gordon said the toughest remaining challenge is cultural, with behavioural changes still needed to enable effective relationships between operators and suppliers.
“There have been pockets of change but it’s not universal,” Mr Gordon said. “There are champions out there who are trying to do things differently. Indeed, there are good examples of how effective change can be brought about through early engagement between operators and their contractors.”
Some of these will be highlighted at this year’s Subsea Expo in Aberdeen.
Mr Gordon said: “Many in the industry have been through prior downturns. But have they learned from them? Not always. However, this lower for longer, or forever, downturn has had a real impact. Companies are probably a lot wiser this time.”
Mr Gordon agreed that further factors are now at play that are making operators more careful with supply chain relationships. The most powerful is offshore wind, which has been a godsend for many small firms since the oil price crashed in 2014 and famine set in.
EnQuest today reported a near-50% increase in production across the group last year, and predicted a 20% jump in 2019.
London-listed EnQuest pumped out 55,447 barrels of oil equivalent per day (boepd) last year, in line with expectations.
The company revised its full-year production guidance range to 54-56,000 boepd at the start of December, from 50-58,000 previously.
The Magnus field exceeded expectations, delivering 21,528 boepd in December. EnQuest completed the acquisition of the remaining 75% of Magnus from BP that month.
But the Kraken field was hampered by FPSO and weather-related outages, coming in at 30,310 barrels per day.
Net debts totalled £1.35 billion at the end of last year, with cash and available bank facilities of around £235 million.
Production is expected to grow by about a fifth to between 63-70,000 boepd this year.
EnQuest chief executive Amjad Bseisu said: “The group delivered on its operational targets for 2018, growing production by 48%.
“This performance and higher realised prices has facilitated accelerated repayments of the group’s credit facility.
“Completing the acquisition of additional interests in assets from BP has delivered a set of assets with a strong strategic fit into our portfolio, with the Magnus asset in particular bringing a significant step change in the group’s ability to generate positive cash flow.
“We expect material production growth of around 20% in 2019. Our capital programme includes new wells at Magnus, Kraken and PM8/Seligi as well our pipeline projects at Thistle/Deveron and the Dons and Scolty/Crathes.
“The successful delivery of this programme will underpin production during 2019 and beyond. Our focus on cost control and capital discipline, combined with our improved cash generation capability enables further repayment of debt, which remains the priority for the group.”
Scottish firm EnerMech expects diversification to double its size within five years.
The bullish outlook from the Aberdeen-based mechanical and electrical services company yesterday came as it unveiled plans to develop a new facility, creating 100 jobs, in south-west England.
EnerMech is targeting the nuclear, industrial processing, refining, petrochemical, aviation, defence, transport and infrastructure sectors as – like many other north-east firms after the region’s recent downturn – it diversifies from its energy industry roots.
Chief executive Doug Duguid said: “We have always been an outward looking business. This extension into new markets is a natural step and part of a global strategy which will see EnerMech double in size over the next five years.
“We have successfully diversified from our traditional oil and gas base in to major infrastructure projects, and this is another good example of introducing our skills and industry expertise in to new sectors which demand similar levels of regulation and duty of care.”
Founded 10 years ago, EnerMech employs 3,500 people across 40 locations in the UK, Norway, the Middle East, Caspian, Asia, Africa, Australia and Americas.
The firm works on large scale projects across the oil and gas, liquefied natural gas, renewables, defence, power, infrastructure and petrochemicals sectors.
Its growth projection would see annual revenue catapult from an estimated £430 million last year and £361m in 2017.
EnerMech was recently acquired by private equity firm Carlyle Group in a £450m deal.
Progress has been made since Scottish Enterprise (SE) published its subsea action plan two years ago, its head of oil and gas said.
Besides assisting companies like Balmoral Group and Baker Hughes, GE with new oil-related test facilities, David Rennie has been working
That means getting subsea companies to realise that there are many opportunities outwith oil.
SE has just published nine market research reports highlighting each opportunity sector, including offshore renewables, aquaculture and carbon capture.
It is even working with economic development body Opportunity North East (ONE) to help with its own diversification.
Then there is the Nippon Foundation relationship, which has led to a first subsea technology funding round of £4.4 million awarded to Scottish companies for five projects spanning three years.
That funding is being matched by The Nippon Foundation and Japanese partner companies.
There are eight Scottish companies partnered with five Japanese:
o Japan Marine United Corporation with Enovate Systems
o Kawasaki Heavy Industries with Hydrason Solutions and The Underwater Centre, though the latter has since gone bust.
o Mitsubishi Heavy Industries with Coda Octopus Products, Hydrason Solutions and Industrial Systems
o NEC Networks and Systems Integration Corp and Japan Agency for Marine-Earth Science and Technology with Tritech International
o Yokogawa Electric Corporation with EC-OG, Hydrafact, SMS Oilfield and WFS Technologies.
Mr Rennie said these projects are hugely important for Scottish Enterprise.
A second call is being prepared.
Mr Rennie and his team are also working behind the scenes to win support for the Underwater Innovation Hub, proposed as part of the oil and gas sector deal.
For those who are not aware, this would utilise a hub and spoke model with Aberdeen as the hub. It would be about facilitated research and driving innovation.
SE is also putting effort into the ‘blue economy’, which centres on sustainable exploitation of ocean resources. Mr Rennie said: “It has to be recognised that other parts of the world like Canada and Norway are very much looking at this and that’s part of the reasoning for the Underwater Innovation Hub.
“The supply chain is becoming more diverse and some of that is to do with SE’s support, but most of it is companies getting on and doing it for themselves. That’s a good thing.”
But while offshore wind is an increasingly popular and profitable option, Mr Rennie is keen for subsea to look at hydrogen economy opportunities, and carbon capture.
“None of this is brand new,” he said. “They should be seen as complementary opportunities and could help put subsea companies in a really good place. It would be daft not to look at such opportunities.
“Digitalisation and automation are hugely important options too, bearing in mind that the subsea sector is already active in that space and could utilise that experience in other industry sectors. It could similarly import digital and automation developed in other industries into oil and gas.”
But as the current oil and gas up-cycle gains traction and the offshore industry recovers, the supply chain may be in a better position to stand up to operators than at any time in the past.
This is because the sector now has a sizeable set of alternative and complementary business opportunities, especially maritime renewables.
Suppliers can use these opportunities as protection against downturns and price bullying by oil and gas companies.
Indeed, in Scotland alone, 265 out of the country’s 652 subsea engineering companies are already in offshore wind, according to recent research from Scottish Enterprise.
Optimism is once again in the air in offshore oil and gas circles and subsea is set to do very well.
Within five years the subsea oil and gas market will more than double from an annual value of £23 billion to £46-53bn by the early 2020s.
And within 20 years, subsea production will level-peg output from surface installations, according to Rystad Energy’s managing partner, Jarand Rystad.
At present, 70% of global oil and gas comes from onshore fields. Some 30% is produced offshore, of which one third is subsea. In other words, subsea now accounts for around 10% of overall production and may reach 15% in the early 2020s.
Subsea infrastructure currently delivers about 15 million barrels per day (bpd).
It may get to 35bn bpd by 2030 if current and predicted future projects are delivered.
Over the same period, output from surface fixed and floating production units is expected to increase from 28-35m bpd, therefore parity will have been achieved.
But while the future looks good, life has been tough since the 2014 oil price slump savaged the industry, with at least 300,000 supply chain jobs lost on- and offshore worldwide.
Predictably, offshore activity recovery is proving slower than onshore with the result that big hiring campaigns have yet to gather pace.
“In fact, subsea-exposed companies experienced employee cuts of 10% in 2017 compared to 2016 – an overall headcount reduction of 32% from the peak in 2013,” Rystad said.
“Subsea engineering personnel in some countries has fallen even further, showing a 50-75% decline from the highs in 2013.”
This is about to change.
New field development approvals are on the rise in the North Sea and worldwide and this is likely to precipitate a “spree of subsea engineering activity”.
“Going forward, we see an upside potential of 36% in total subsea awards towards 2020 compared to the awards in 2017,” Rystad said.
“In the short-term, we expect subsea engineers to work on new tie-back developments in Europe and Africa, whereas entering the 2020s we expect the subsea engineering market to be driven by FPSO developments in Brazil. South America alone has potential market growth of 52% compound annual growth rate from 2018 to 2020.”
But the market is rigged against contractors. Cost and risk have been reduced for operators, while more responsibility and work has been transferred to subsea engineering suppliers.
Rystad said: “Keeping in mind that personnel at subsea engineering companies have been reduced to 10-year lows, there is a risk of capacity shortage.
“Regardless of efficiency gains, there is an increase in subsea activity that requires more working hours to be put down in this field.
“Some companies have acknowledged it and started to hire. Others believe that the workload challenges can be eliminated by efficiency gains, like having more experienced workers on their payroll.
“Another solution could be to implement a higher degree of sharing and re-use of development concepts across the industry to tackle the amount of work in their backlog.”
The uptick in offshore activity combined with ongoing industry consolidation gives reason to believe that backlogs are building up fast for subsea suppliers.
That in turn will invariably start to push up prices again, sooner or later.
Rystad added: “Subsea companies exposed to the North Sea, which is leading the offshore comeback, are best positioned to experience incoming contracts at higher rates.
“This will soon also apply for other regions, like the US and Brazil, where we expect activity to ramp up.”
Wood Mackenzie (Woodmac) analysis points in the same direction. A year ago it highlighted the uplift in subsea production tree orders as a key indicator of subsea progress with 2017’s order book double that of 2016.
Its analysts have said that the new norm for subsea tree manufacturers will be in the 250-270 trees per annum range into the early 2020s.
Comparing this with just 83 in 2016 is a sure-fire measure of just how tough life was for offshore contractors during the 2014-until-recent downturn.
This year, Woodmac expects the North Sea’s recovery to consolidate with more than £14.5bn earmarked for investment in 2019 alone.
It expects another bumper year for North Sea final investment decisions (FIDs), with 23 project sanctions in sight – 12 in the UK, nine in Norway, one in the Netherlands and one in Denmark.
The North Sea will be responsible for a third of global subsea awards this year alone.
Throwing the net wider, it’s not just offshore Europe that’s picking up – Woodmac predicts good times for the US Gulf of Mexico, too. Indeed, 2019 could be pivotal for ultra-deepwater.
Chevron’s Anchor project in Green Canyon Block 807 is expected to move forward. Anchor, which has an operating pressure of 20,000psi, would be the first ultra-high-pressure project in the world to reach FID.
This would mark the culmination of more than a decade of multiple joint industry research and development projects to design subsea kit that can safely produce at 20,000psi. The current limit is 15,000psi.
Success at Anchor would lead to the next wave of mega-investment in the Gulf of Mexico, as several 20,000psi projects are waiting to follow its lead.
Woodmac believes that if Anchor moves forward, more than £7.6bn of investment could flow into the region.
The UK Department for International Trade (DIT) is keenly pushing Brazil, which remains a hugely important subsea marketplace.
The recovery in oil prices and recent licencing rounds are attracting new investments to the market. An example is ExxonMobil, which recently returned to Brazil.
DIT reports that the Brazilian Government has been taking action to improve the country’s oil and gas business environment.
The country is reviewing its regulatory frameworks to attract more investments by relaxing its local content policy, reviewing and improving the natural gas regulatory framework.
It is eliminating parastatal Petrobras’ exclusive rights to operate in the pre-salt area, renewing of special tax regime.
This can only be good for subsea, which in the last up-cycle found it very hard to do business in Brazil, recording losses in many cases. That impacted Aberdeen, which remains the world’s leading subsea operations centre in spite of everything.
A top employment lawyer has warned North Sea firms not to “miss the boat” on getting a piece of Western Australia’s booming energy sector.
Delegates gathered yesterday for the third Aberdeen-Perth, WA Gateway event at the Norwood Hall Hotel, showcasing the region which will this year become the world’s largest exporter of liquefied natural gas (LNG).
Katie Williams, from top legal firm Pinsent Masons, recently moved to Perth after heading up the company’s Aberdeen office.
Speaking remotely along with other businesses from Perth, she told Aberdeen firms not to miss out on the opportunity.
Perth, WA is expecting a surge in activity through a range of projects including Shell’s Prelude development, the world’s largest floating LNG platform, due to come online in around the next year.
With that boom could come a “skills shortage” due to the city’s remote location which North Sea firms could fill, according to Ian Grant – a “global Scot” and production operations vice president for Australian energy firm Santos.
He said: “Historically with oil and gas, you tend to find as activity levels increase, the skills shortage appear and the salaries get pushed up very quickly.
“From what I can see there is an opportunity to come here quite soon and take advantage of the growing energy market and potentially build a base organisation before these skills shortages appear.
“Two or three years down the road there may not be a skills shortage.”
Ms Williams added that the time is now to take advantage of the opportunity.
Mike Deeks is Agent General for Perth, Western Australia
She said: “You don’t want to miss the boat and what we have here is a very structured business community, a very sophisticated one, albeit relaxed.
“From our perspective we feel the time is right to come.”
The event is aimed at strengthening ties with Aberdeen firms with expertise in oil and gas and may be seeking to expand internationally.
It comes ahead of the Australian Oil and Gas Conference being hosted in Perth next month.
Heading up the delegation was Mike Deeks, the state’s Agent General who is currently based in London.
He said: “Very shortly this year Australia will take over the mantle from Qatar as the world’s leading LNG exporter and we want to maximise the benefits that come out of that.
“We look at what Norway and Scotland have done in terms of supporting their offshore oil and gas industry and bringing benefits to their countries.
“We want to try and do the same thing in Western Australia.”
Mr Deeks, a former Royal Australian Navy commodore, added that Western Australia is home to the nation’s submarine force as well as its growing subsea sector, meaning there is plenty innovation in that space which in turn can passed to the North Sea sector.
Additionally, WA is currently planning out and in the process of decommissioning some of its older oil and gas installations, which is becoming “more and more urgent” for the state.
WA’s government has recently published decomissioning guidelines and Mr Deeks believes UK expertise could help in the endevour.
He added: “There’s a lot for everyone to learn about decommissioning.
“It is an area of growing concern for us in Australia and in the region so we’d like to talk to Scottish based companies with expertise in the decommissioning field and see how we could perhaps learn from them.”
The new year is the ideal time to start fresh. It brings a sense of opportunity as many people seek to start their own entrepreneurial journey and 2019 will be no different.
But with many others thinking the same thing, what is the best way to get ahead?
Elevator, a social enterprise which supports start-ups across Scotland through its delivery of Business Gateway and a range of other programmes to inspire entrepreneurs, spoke to two of its Business Gateway growth advisers for their top tips for growing your business.
Gordon Mackay, Business Gateway Growth Adviser, has a strong background in sales and utilises this in helping clients across an increasingly diverse range of industries including digital and financial technology (FinTech).
He said: “Sharing knowledge is crucial for any growing business, something I have picked up from a 40-year career. Many people working in the FinTech industry forget that it is still relatively young, meaning there is a misunderstanding in the exact procedures which need to be followed. My role consists of helping companies overcome these misconceptions and supporting them to realise their full potential.
“I am currently working with Udrafter, an online platform that connects skilled students with local companies to carry out one-off jobs or bite size projects on-demand.
“Udrafter is still in the early stages of business, however, it is owned by a young graduate with a strong vision and burning ambition to succeed.
“One of Business Gateway’s main challenges is people do not realise the full value of the service because it is free, however, in this case it has been the opposite, and this is what makes the job even more rewarding. My one key piece of advice would be to set realistic growth plans and work to these, while taking full advantage of the support available.
“Remember, whether you think you can, or you think you can’t, you’re probably right.”
Bill Hogarty, Business Gateway growth adviser, has spent most of his career working in the oil and gas sector, however, his experience is not limited to these markets, as he
has also worked in the utilities industry.
“I look upon our organisation, as the name suggests, as the ‘Gateway’ to support and advice and pride myself in being as knowledgeable as I can.
“Day-to-day I find myself dealing with a variety of clients. No two are the same. I am currently working with Trojan Energy, developers of innovative on-street charging solutions for Electric Vehicles. The potential of the businesses is significant, showing great promise to achieve and exceed expectations.
“In December 2018, Trojan Energy scooped £50,000 from Scottish EDGE to help take their business forward. Recognition from such a prestigious funding competition reinforces the credibility of the quality of businesses which come through our door daily, a proud moment for all advisers and one which gives me a real buzz.”
If you’re interested in starting your own business, or even looking for support with your current business plan, contact a member of the Business Gateway team today at www.bgateway.com or 01224 946539.
For industry stalwart Glenn Hurren, the new year heralded exciting change as he stepped into a new role as UK managing director of ASCO.
Mr Hurren brings a wealth of both international and domestic experience, and an impressive track record of delivering strategic improvements and operational efficiencies to the role, having spent more than 40 years in industry.
More than 14 years of that time was spent working with the global specialist in materials and logistics management. He previously held a number of senior roles with the company including vice-president of ASCO US, UK business development director and, most recently, regional director of ASCO’s Southern North Sea operations. In his new role, Mr Hurren will lead the continued growth of ASCO’s UK operations across all ASCO Group companies which includes Asco Freight Management, NSL, OBM and Seletar.
Mr Hurren said: “It is still a challenging environment, and as a result efficiency remains firmly at the top of the corporate agenda. A big focus of my new role is unlocking opportunities for increased collaboration in order to drive efficiency within the supply chain. The continued integration of our businesses and services will be the key to achieving this.
“ASCO’s group structure means we are uniquely positioned in the market to create value propositions that integrate a wide range of logistics and materials management services to meet the needs of the industry. This ability to consolidate key services and skill-sets to offer our clients tailored solutions that add value has never been more important.
“To drive long-term growth, it is important that we continuously develop a culture of collaboration where we break down silos and work as one ASCO team across the whole group.”
As part of Mr Hurren’s new role, he will be based at ASCO’s headquarters in Aberdeen, Dyce, but will regularly travel to all of the group’s UK sites.
He said: “It’s of great importance to me that I know what motivates our team and where the day-to-day challenges lie. I’ve spent the last month in the new role meeting with all ASCO teams and working together with our senior leaders to develop our trajectory for long-term growth and how we will continue to innovate.”
He also brings extensive international experience to the role having worked in Houston, the Netherlands, the United Arab Emirates and South America in a 40-year career in oil and gas.
“I’m confident that I will be able to leverage key insights and learnings from my work in international markets to stay one step ahead,” he said.
PIM is delighted to announce that its second annual integrity management conference, ‘Risk: strategy rather than chance’, will take place on Thursday March 28.
This year’s event, which will be held at the Carmelite Hotel, Aberdeen, will focus on integrity management and risk. Speakers will cover a diverse range of risk related topics under the themes of risk principles, risk management and learning for the future.
Steven Plant, managing director of PIM, said: “We saw last year’s event as an opportunity to bring integrity management professionals together to discuss the issues which are affecting integrity management in the North Sea. The feedback we received from the delegates was extremely positive. They welcomed the opportunity to hear stimulating presentations alongside a forum for networking and lively debate.
“We want to continue to collaborate with our peers in the integrity management sector and with the wider oil and gas community. The topics which will be up for discussion on March 28 include the importance of culture and the role it has to play in integrity management, the digitisation of the inspection process as well as looking to the future and considering what we can learn from other industries.”
Mr Plant added: “We expect this year’s conference to be even more successful and look forward to hosting the integrity management community again.”
Anyone interested in reserving a place at PIM’s free integrity management event should email PIMEvent@pim-ltd.com
PIM’s integrity management event takes places just two weeks after the SPE Offshore Achievement Awards ceremony where the company is in the running for the Great Company (SME) award.
“We have no doubt PIM is a great company. We take pride in delivering excellence to our colleagues so they can realise their potential, but also to our clients through our work, and to the wider community through our commitment to collaboration which is, in part, realised through this event,” Mr Plant concluded.
Guyana, a country that currently produces no crude, could pump more than OPEC member Venezuela in five years.
While U.S. sanctions on Venezuela threaten to accelerate an already steep slide in production, neighboring Guyana’s output is poised to reach 750,000 barrels a day by 2025, according to an estimate from Exxon Mobil Corp. The oil major has partnered with Hess Corp. and China’s CNOOC Ltd. to develop one of the world’s biggest new deepwater oil discoveries off the country’s coast.
The potential gusher comes as Venezuela’s production plunges amid an economic crisis and U.S. sanctions targeting the country’s oil sector. Venezuelan output has declined almost 50 percent over the past three years, according to data compiled by Bloomberg. If sanctions compel U.S. oil companies to wind down their business in the Latin American nation, production could sink to 600,000 barrels a day, according to Rapidan Energy Group.
Even in the event of a speedy political resolution, production will probably fall to 890,000 barrels a day in 2019 due to “an extraordinarily deteriorated industry that is short on expertise and direction,” said Mara Roberts Duque, a BMI Research analyst based in New York. Still, Venezuela has far more production capacity than Guyana. If the country stabilizes and repairs its oil sector, it’s unlikely that Guyana would surpass it, she said.
Meanwhile, Venezuelan President Nicolas Maduro has threatened to stymie development of the oil play, vowing to block Exxon from exploring in contested waters off Guyana. Exxon is in talks with Guyana’s government on the matter, Chief Executive Darren Woods said in an earnings call Friday.